Charters? Jet Cards? Fractionals?

Business jet travelers are passionate about their aviation choices. You can tell from the strong and contradictory opinions they offer when you ask them about the relative merits of charter, jet cards and fractional aircraft ownership or the companies that provide these services. This reflects in part the fact that evaluating access models and weighing options is a complex undertaking and that one flier’s ideal solution often won’t suffice for another.

So how can you decide whether charter, a jet card or a fractional share would be best for you? And how can you determine which provider or providers would best suit your needs? Large sums of money, personal safety and comfort ride on your choice. Aviation consultants and attorneys can guide you through the decision process, and it can certainly make sense to pay for their expertise. But you can point yourself in the right direction.

Start by considering how many flight hours you use annually. The rule of thumb is that up to 25 hours calls for charter; 25 to 50 hours is the sweet spot for jet cards, which are debit-style cards that provide guaranteed access to aircraft at preset prices; and if you’re flying more than 50 hours per years, fractional ownership—in which you purchase a share in a jet—begins to make sense.

The thinking behind the metric is clear. Many of the cards are sold in minimum denominations of 25 hours or face values of about $100,000, putting them out of reach of infrequent business jet users. Meanwhile, 50 flight hours per year constitutes a 1/16th share of a fractionally owned aircraft, generally the smallest size sold.

There’s logic to this calculus, but it can create the false impression that a continuum of access options exists along which a business jet user progresses as his flying time increases. In fact, some people employ a fractional share, a jet card and charter, while also taking advantage of a provider’s alliance with an airline for long-haul international travel. They decide which solution to employ on a mission-by-mission basis.

Moreover, the lines between offerings have blurred. Charter operators have morphed block charter—discounted flight hours sold in bulk—into jet cards, while jet card and fractional ownership programs now also broker charter flights for their customers. Meanwhile, program offerings have become more refined to appeal to a wider and more nuanced array of travelers. This gives you more choices than ever. But it also makes sifting through the access options and providers all the more challenging.

Before choosing a long-term solution for your private air travel needs, you must determine what those needs are. If you’ve landed a business contract that will require lots of travel for a small team to or from an area not served by airlines, or you’ve come into a windfall that will allow you to fly everywhere by private jet, you should begin by using ad hoc charter. Become familiar with the aircraft models that suit your routes, passenger loads and other criteria. See how much airplane, flight time and service you really need.

Make a detailed record of your flights. Note travel days, dates and time of day, the reason for each trip, how many people and who traveled with you, how far in advance you made the booking, the amount of baggage, how flexible you were about changing the schedule of each particular flight, the aircraft type, age and quality and what you liked and didn’t like about each trip.

Sifting this data will tell you, for example, whether you should look for a solution that provides the best savings on round trips or one that charges no premium for access on peak travel days, whether consistent concierge service is more important to you than simple savings and a host of other actionable information.

Business aviation can be about more than simply getting from point A to point B quickly, comfortably and privately, or avoiding the hordes, security checks, long drives to a commercial airport and threats of delays and missed connections. Business jet travelers will tell you that some of the best ideas and most productive meetings occur at 45,000 feet, while earthly distractions are far away. Others talk of the over-the-top customer service that turns flying into an experience they look forward to rather than tolerate.

How much are these potential benefits worth to you? The epiphanies come easier in a cabin you can stretch out in but a cramped aircraft may be perfectly capable of transporting you and your team where you’re going. And the highest levels of customer cosseting typically come with a price tag to match.

Carefully vet aviation service providers before you work with them. If a company is publicly traded, you or someone you task should review all relevant financial statements. If it’s privately run, request pertinent documents to ascertain that it is financially sound. Operating aircraft is a capital-intensive endeavor, and companies in this business need a healthy reserve of cash to pay for fuel, labor, parts and maintenance. When funds run low, maintenance is often among the first items that get cut back.

Check the FAA database for any accidents or actions involving the operator, and query the Better Business Bureau and other consumer agencies regarding complaints against any operator or broker you’re evaluating.

Peak, off-peak and blackout dates. Most card and fractional programs specify travel days during which you may face restrictions on access or added costs, based on your membership or ownership level. Charter customers may face de facto blackout dates during peak-demand periods.

Cancellation policies. Review the notification time required for refundable cancellation of your flight. International flights and peak-travel-day bookings may require cancellation as much as five days in advance to avoid loss of the entire estimated cost plus associated fees.

Service area. Most U.S.-based jet card, fractional ownership and major charter companies cover the continental U.S. and Canada, portions of Mexico and the Bahamas and Caribbean, but primary service areas vary and you may be assessed positioning fees for flights outside such areas.

Trip minimums or daily minimums. Policies differ on minimum flight time. Many programs and charter providers charge a minimum of one or two hours per flight or a minimum usage per day.

Call-out times. The time required in advance to book a flight can vary widely, though typically higher-denomination cards and larger-sized fractional shares provide faster access than lower-cost products from the same provider. Charter customers should discuss call-out time requirements with their charter provider.

What the price includes. Pricing policies aren’t uniform; applicable fuel surcharges may not appear in cost estimates. The 7.5 percent federal excise tax on all flights within the U.S. isn’t included in the prices quoted by all jet card and charter operators. Other costs that may not be bundled in charter, jet card or fractional pricing include crew overnight fees, de-icing, catering and ground transportation.

Charters – Flexibility, Economy and Fast Response

Charter is the limousine service of the sky, ready to pick you up and transport you in safety and style on occasions when other transportation options won’t do—or when it makes more sense to charter than to burn hours off your jet card or fractional share. With charter, if your passenger count or travel distances change from trip to trip, you can order the right-sized vehicle for each journey.

The two drawbacks usually cited as charter’s Achilles’s heel—round-trip pricing and lack of guaranteed access—are often nonissues today. One-way pricing—made possible by the floating-fleet model, in which charter aircraft needn’t return to a home base after dropping off passengers—enables you to avoid paying for a flight you don’t take. Concurrently, a surfeit of quality aircraft available for charter means that—with the possible exception of peak-demand periods—you will rarely be left standing on the tarmac for lack of an airplane.

One of charter’s attributes is that it’s usually the most economical way to access a business jet, short of owning your own heavily flown airplane. On a per-hour basis, charter typically costs less than fractional and even less than a jet card. And lack of guaranteed access notwithstanding, with call-out times for some fractional and jet card programs up to 10 hours, charter can be the fastest way to get airborne.

It’s helpful if you travel on heavily flown routes—transcontinental or between the Northeast and Florida, for example—because the high volume translates into more availability and lower rates. Conversely, if you’re based in a region where you have limited access to the lift you need (for example, relatively few large-cabin jets are based in the Plains states), charter choices will be more restricted and expensive, and a jet card might be a better solution once you’re flying enough to justify its purchase.

Your charter provider, whether operator or broker, is the key to the quality of your experience. A good one will give you a well-priced selection of aircraft for each trip quote you request and will be adept at handling any special needs. You can try out several providers, but it’s best to ultimately settle on one or two you will work with consistently.

Operators and brokers both arrange charter flights. Operators sell charter on aircraft they manage and are responsible for all aspects of flights, from providing the crew to maintaining the fleet. Licensed under Part 135 of the Federal Aviation Regulations, they must adhere to standards covering virtually all facets of their operation. Brokers arrange transportation aboard operators’ aircraft and offer the benefit of being able to source aircraft from multiple suppliers. However, they are not licensed or regulated.

All Part 135 charter operators must meet minimum guidelines, but many maintain higher standards for operations and crew experience and training set by ARGUS, Wyvern and the Air Charter Safety Foundation. Operators can undergo an audit from these organizations to earn certifications, such as ARGUS Gold and Wyvern Wingman. Ascertain the audit standards of any operator you consider, and understand what the ratings mean. If you’re working with a charter broker, inquire about the standards it uses in selecting operators. Typically, you can specify to a broker, on a trip-by-trip basis, whatever minimum standards you wish.

Charters – What’s New

Charter operators are forging alliances to create fleet and marketing networks that can deliver more optimized travel solutions. Last fall, Van Nuys, California-based Clay Lacy Aviation and Chicago’s Priester Aviation announced an alliance that creates a network comprising some 70 charter aircraft across the U.S….Last December, San Francisco-based charter and card provider Xojet added TWC Aviation in San Jose, California, to its Platinum Partner network, giving TWC’s charter customers preferred access to Xojet’s fleet of Challenger 300s, Citation Xs and Hawker 800s, and giving Xojet card customers guaranteed prices and access to TWC’s large-cabin business jets…Executive Jet Management, NetJets’ air-charter arm in the U.S., introduced a Web site this spring that can deliver immediate estimates of trip costs and simplify guaranteed-quote requests…The per-seat pricing concept has advanced in the past year. Greenjets morphed into Blackjet, lowered its membership fee and expanded its service network; meanwhile, contenders including California’s Surf Air and London-based Victor have entered the per-seat field.

Charter customers tend to:

...be occasional users. Charter provides access when you need it, and you don’t have to lay out cash in advance.

...be based near a business aviation hub. Lots of nearby lift helps make charter convenient.

...need a variety of aircraft. If your passenger loads and distances traveled often change, charter can provide a right-sized aircraft for each mission.

...be bargain hunters. The empty-leg and spot market offer great deals that dedicated charter shoppers can take advantage of.

Jet Cards – Ownership Perks with Less Upfront Investment

As noted earlier, jet cards are debit-style cards. They provide access to a single model or category, or to a fleet of various categories of business aircraft. They may be sold in hours of flight time (e.g., 25 hours) or dollar amounts (e.g., $100,000). Typically, the more money advanced or hours purchased, the lower the hourly rates. Created to mimic the fractional ownership experience, jet cards feature one-way pricing, guaranteed access and concierge service—all without the capital investment or commitment of ownership.

Hour cards generally best suit travelers who use one category of aircraft and like to keep tabs on their available flight time. Dollar-value cards make more sense for those who desire access to a whole fleet, where hourly rates vary with aircraft category. Several programs sell both card types.

Jet cards favor fliers who make one-way trips, as no roundtrip or repositioning charges apply. However, some programs offer roundtrip discounts and off-peak pricing. Many other rules distinguish individual programs, and it’s important to consider the impact of these rules in the context of your flying patterns.

Check the program’s replenishment policies and expiration rules. Some allow incremental purchases of flight time, a boon if you need just a few additional hours before the card expires, while other programs require purchase of a new full-value card. Also, many jet cards have a finite life – typically one or two years – after which unused hours or dollars evaporate.

Keep in mind that the purchase price typically goes into a general operating fund and is not segregated in a protected escrow account until you use the card. You will likely have little chance of recovering the funds if the provider defaults on its obligations to you. Take any reticence to share financial information essential to sound decision making as a warning sign.

Jet Cards – What’s New

Bombardier’s Flexjet has introduced Coastal Connect, which provides special rates for transcontinental flights (operated by Jet Solutions) on Challenger 300 aircraft for holders of the FlexJet 25 Jet Card…Fractional provider Flight Options’ Jet Membership Club offering, which provides access to the Embraer Phenom 300, welcomed its 100th member in April and has added the Nextant 400XT to its offerings…Fractional giant NetJets, which already owns card-provider Marquis, has entered the jet card business in China. NetJets has introduced the Private Jet Traveler Card, aimed at China-based travelers, providing access to the company’s U.S.- and Europe-based large-cabin aircraft in 25-hour increments…Cessna’s CitationAir, which discontinued its fractional program last year, has dropped its jet card programs as well, and now focuses on its charter and aircraft management offering.

Jet card holders tend to:

…need the access but not the asset. Companies that don’t want a business jet on their books can reap some ownership benefits while costs are treated as simple business expenses. Jet cards mimic fractional programs, and cardholders enjoy guaranteed access and varying degrees of concierge service.

…make many one-way trips. Card programs provide the most value for people who primarily take long, one-way flights, as the extra costs associated with such operations (the potential for long, non-revenue-generating return flights) are spread among all cardholders.

…not necessarily be based near a business aircraft hub. If suitable charter choices are limited in your region, a card can make sense, because it provides access to the lift you need with no positioning fees and spreads the costs of servicing out-of-the-way owners among everyone in the program.

…occasionally need supplemental lift. Cards can supplement a fractional share or reliance on charter by providing access to alternate aircraft or guaranteed lift in times of peak demand. They can also be used to keep personal travel expenses separate from corporate ones.

Fractionals – Ownership without the Responsibilities

Whatever your preferred access model, give a cheer for fractional ownership, progenitor of the modern business jet travel era. Industry pioneer NetJets and its followers brought thousands of well-heeled folks into the folds of business jet users. Many owners ultimately saw the value of their aircraft shares tumble below projections and exited the programs. But many of these former shareowners remain dedicated business aviation users.

Fractional ownership still appeals to heavy flight-hour consumers for its cost advantage over jet cards and for its elimination of aircraft ownership responsibilities. The program provides the flight crew and takes care of maintenance. As a fractional shareholder, you will rarely if ever fly on the aircraft you partly own, but rather on an identically equipped model, and if all such airplanes are in use, you’ll typically be upgraded to a larger one.

Depending on the program, you may also be able to access an entire fleet of aircraft categories, enabling you to select the best-suited jet for each mission, and/or have access to more than one aircraft at a time, in the event you need multiple flights on one day. Additionally, if you want to fly on the most state-of-the-art business jets, consider that the newest models will typically be in fractional fleets before delivery positions become available to individual buyers.

Among the greatest advantages of fractional ownership are the tax benefits that result from purchase and depreciation of the capital asset. The division of shares in an aircraft is usually predicated on 800 occupied hours per year, with a 1/16th share equal to 50 hours of flight time. Purchase prices are proportionate to ownership stakes, and thereafter you pay monthly management fees that cover all fixed costs, plus hourly fees for use of the aircraft.

Fractional-ownership contracts typically run for five years, though exit clauses can usually be exercised after 24, 30 or 36 months, with brokerage, transfer fees and early-exit penalties varying. At the end of the contract, the fractional provider buys the share back at market value. Some programs allow you to renew your agreement and retain ownership for an additional five years, an option that can greatly lower the cost of ownership over the period.

The value of the aircraft at the end of the contract is the largest financial issue fractional owners face. It’s imperative that you have a realistic sense of resale values of the shares you’re considering. (You may be able to purchase “back fill” shares—shares vacated by former owners who leave the program prematurely—at a reduced price.) Once you buy, have your share independently valued annually. Under most fractional contracts, you have the right to seek an independent appraisal if you don’t agree with the residual valuation the program provider assigns to your aircraft when it’s time to surrender the share.

Fractionals – What’s New

Last fall, NetJets added its first Global 6000 (also the first of its NetJets Signature Series aircraft, which features advanced cockpit and cabin technologies and designs)…This year, Bombardier’s Flexjet expects to add the new Learjet 70 and 75 and the composite Learjet 85 to its fleet. Meanwhile, the company’s new FlexShare program offers access to two aircraft from its Challenger and Learjet fleet for the price of one blended 50-hour fractional share, with hours of allocation (25/25, 40/10, etc.) set at purchase…Fractional ownership has reached China, as Beijing-based charter operator Deer Jet is selling shares in a Gulfstream G450 and a G550. The program targets customers flying 100 to 300 hours per year, and the aircraft can be flown anywhere in the world…Back in the U.S., Executive AirShare has introduced the EMBark32 card program, which applies credits earned for hours flown on the card toward a 1/32nd share in a Phenom 100. The company operates a fleet of Central U.S.- and Great Lakes/Midatlantic-based Phenom 300 and 100 jets and King Air 350 and C90B turboprops.

Fractional shareholders tend to:

...be heavy users of aircraft. For frequent fliers, owning an airplane (or part of it) can make more financial sense than renting via card or charter.

...desire consistent service and guaranteed access. Fractional programs provide high levels of customer service, and as an owner you have access to an aircraft whenever you need it.

...be in a position to enjoy tax advantages. Depreciation and other potential tax benefits can make ownership financially advantageous compared with other access options.

...be consistent users of one aircraft type. Fractional programs make most sense if you primarily use just one category of aircraft (e.g., mid-size) or a particular model, though providers typically offer interchange options on a per-flight basis.

...appreciate easy ownership. Get the freedom and tax benefits that come with ownership while leaving administrative and operational responsibilities to the program. Fractional programs can be the fastest way to get aboard newly introduced aircraft models, thanks to the early orders that programs place.